Government launch CDC pension schemes consultation

The Department for Work and Pensions has published a consultation setting out its proposals for collective defined contribution (CDC) pension schemes.

The government said CDC pension schemes allow contributions to be pooled and invested to give members a target benefit level.

The consultation sets out proposals as to how a particular form of CDC scheme might work in the UK, and the legislative and regulatory regime that would be needed to support any such scheme. It gives an indication of the government’s policy intentions and likely focus of the legislation.

It added that the advantages of CDC schemes include they:

• Provide a savings and income in retirement option within one package that is potentially attractive to people who are uncomfortable making complex financial decisions at the point of retirement;

• Enable the sharing of longevity risk between members, therefore providing each individual member with an element of longevity protection without the cost of accessing the insurance market;

• Allow employers to offer their employees a pension scheme, which offers an income in retirement in the form of a pension from the scheme’s own assets, but without the risks and balance sheet impact of sponsoring a defined benefit plan.